Fear Produces Safety

The Only Safety is Absolute Terror

From an NYT article by Andrew Ross Sorkin: “The [credit-rating] agencies have a long history of getting it wrong. Enron, WorldCom, Penn Central—the ratings agencies always seem to be a day late and a dollar short.

Yet since the 1970s, the ratings agencies have been imbued with a special government status—Nationally Recognized Statistical Rating Organizations, they’re called—and a whole body of regulation has been written that revolves around ratings. Mutual funds, to cite one example, can hold only securities that have the highest investment-grade ratings.

The solution should be obvious, shouldn’t it? Just get rid of that special government status—and stop writing regulations that revolve around ratings. Believe it or not, S.& P. is in favor of such a solution. So why isn’t it in the bill? Because all those money market and pension funds much prefer the crutch provided by the ratings — that way, if anything goes wrong they can simply say “It was the rating agency’s fault.”

It has been years, maybe decades, since I have read such sanity in a NYT business column. Mr. Sorkin is clearly on the very verge of a major discovery: Safety is not the absence of risk; it is the product of risk. Let people know that they stand in imminent danger of losing their lives and fortunes, and they will secure their safety.

The Gulf Spill

According to a story at Bloomberg.com: “BP said it captured 10,500 barrels of oil from its leaking well yesterday, up from 6,077 barrels in the previous 24-hour ending at midnight June 4. The well was estimated by government scientists to be gushing 12,000 to 19,000 barrels a day. The spill is the worst oil spill in U.S. history.

“A ‘cap’ over the well is capturing ‘probably the vast majority’ of the leaking oil, Chief Executive Officer Tony Hayward told the British Broadcasting Corp. today in an interview in London. BP is preparing a second system to capture even more oil that will be implemented within the week, he said. BP plans to swap out those temporary systems with one that is more hurricane-proof by the end of the month.”

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